The New York Times has a report about a government plan that could affect millions of homeowners in the United States. The paper reports that the Obama administration is kicking around a proposal that would "allow millions of homeowners with government-backed mortgages to refinance them at today's lower interest rates, about 4 percent..."
Now, "government backed mortgages" isn't as narrow as it sounds, because it includes mortgages backed by Fannie Mae and Freddie Mac. In a recent story, Bloomberg says Fannie and Freddie back more than 70 percent of mortgage-backed bonds last year. Add Ginnie Mae, which backs FHA loans, and that number climbs to more than 95 percent of U.S. mortgages.
The Times report is based on a two unnamed sources, but an administration official told CBS News that the administration is considering a "host of proposals."
Here's how CBS News explains the plan and how it would help the economy:
The plan could save millions of homeowners hundreds or even thousands of dollars every month, potentially unleashing consumers with extra money to spend on other items. That would boost the economy and create jobs as demand for goods and services increase, backers of the plan say.
The U.S. Treasury took control of Freddie Mac and Fannie Mae, which back home loans made to their standards, at the height of the financial crisis in September 2008 as losses mounted from mortgages gone bad.
They have since taken more than $170 billion in direct taxpayer aid to keep them afloat.
Ezra Klein, The Washington Post's economic thinker, says this kind of plan has been kicking around Washington for a long time and the politics are complicated. But it's also a plan that can be enacted without congressional approval. Klein writes that many "inside the Treasury building have long considered it appealing in theory but less workable in practice."
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